New Term; ESG lack of awareness and how costumers and shareholders are responsible for demanding it in companies

ESG is a crucial lens through which people like shareholders, consumers, and investors can see whether a company is concerned with making more than a profit and contributes to environmental, social, our governance causes or not. As soon as I read that term, I knew that it must be a very hot topic with a lot of research, but it is concerning for me to realize that while some data says that $36 trillion of all professionally managed assets demand ESG analysis, some other data done by professionals at Wharton suggest that that real amount of ESG investing is more like $2-$3 trillion, and other studies claim that it has been growing for the past 10 years. This information only causes preoccupation in myself on the lack of information on ESG investing and how this could also be affecting investors and how much are they concerned with investing in ESG or not. But one thing is for sure, future financial performance is going to be affected by ESG adherence, especially with our new generation of social entrepreneurs who are every time more and more concerned with contributing to the planet and our societies through their business models. I firmly believe that our economy will change along with changes in our industries and companies, as well as public interest in how businesses can implement social and environmental initiatives in their processes, and this is exciting.

Companies will have to change their products and their ways of making products as ESG adaptation is happening, this is a change that is indeed needed for a constructive future of business, and in our current world, as Erick Orts said “every business has to have a climate imperative about its behavior” and with this is also important to realize that climate is greatly affecting our financial markets.  Companies need the ESG lens to observe their strategies, understand what the market is demanding, and inform and educate shareholders. Then again, I am back to feeling concerned about the little information there is on ESG and its complexity, and how shareholders, and consumers, are also responsible for its adaptation, therefore, public education and information on this topic are very important. There is a responsibility from the investors’ side to make sure their assets include an ESG analysis that achieves its goal of investing in companies that are adapting to this lens. All the articles I had read about the environment and businesses’ responsibility always talked about how businesses and entrepreneurs were the main important people in creating change in our economy and the products being released. However, it is difficult to release a product that has an ESG approach when the market and the shareholders are not concerned with it and, therefore are not demanding it, much less willing to spend their money on it.

As Dr. Henisz said, “We all need to understand the role that externalities play in this broader system that companies are embedded in”. If we can bring ESG into the spotlight more often, and inform the general public about ESG – a public that not only includes entrepreneurs, but also shareholders and consumers- then I can imagine a bright future for ESG investing, and seeing companies taking real action to change their processes to adapt to the needs of our world, but that is only if people are informed and demand it.

Investigate more

https://globalyouth.wharton.upenn.edu/articles/business/how-do-we-make-esg-sustainable/#comment-109173